KNM wants to buy foreign firms, expand product line

 By Sharen Kaur

Process equipment maker KNM Group Bhd (7164)aims to buy foreign firms and expand its product line in a bid to diversify and improve earnings, its chief said.



The group, which has RM300 million cash, is eyeing companies with investments in green technology, total solution and process, nuclear and environment, among others.

“There will be some major things happening within the next one year. The idea is to expand geographically and strengthen our product line,” KNM managing director Lee Swee Eng said.

Lee said the investment KNM made in 2008 to buy Borsig GmbH of Germany for e350 million (RM1.4 billion) has strengthened its belief that acquisitions are the right thing to do.

KNM’s German operations have been contributing 50 per cent to the group’s revenue and net profit.

Lee expects KNM to do better this year and growth to accelerate from 2012, driven by its order backlog of RM4.5 billion and business expansion.

KNM will start to see recognition from its RM680 million turnkey project in Uzbekistan and its RM2 billion biomass plant in the UK.

Last year, KNM posted a net profit of RM131.2 million on revenues of RM1.6 billion.

“Overall, we are profitable and on the road to recovery. Our existing order backlog is at an all time high compared to an average RM3.5 billion prior to the economic crisis.

“We are bidding for new projects worldwide,” Lee said at a luncheon in Kuala Lumpur yesterday.

Lee declined to comment on whether KNM will be taken private with its share price falling below fair market value.

Meanwhile, the luncheon, hosted by Germany Trade & Invest and Malaysian-German Chamber of Commerce and Industry, presented new opportunities for Malaysians to invests in all sectors in East Germany, backed by Europe’s largest airport project, Berlin Brandenburg International Airport (BBI).

BBI will have a capacity of 27 million passengers when it opens in early 2012.

Kossan 4Q net profit up 21.4pct to RM29.45m on better product mix, margin

  Written by Surin Murugiah of theedgemalaysia.com    Wednesday, 23 February 2011 20:51

KUALA LUMPUR: KOSSAN RUBBER INDUSTRIES BHD [] net profit for the fourth quarter ended Dec 31, 2010 rose 21.4% to RM29.45 million from RM24.25 million a year ago, driven by the expansion in the company’s gloves division with better product mix and margin.

It said on Wednesday, Feb 23 revenue rose 11% to RM252.97 million from RM227.75 million. Earnings per share were 9.18 sen while net assets per share was RM1.40.

For the financial year ended Dec 31, 2010, Kossan’s net profit recorded an increase of 76.1% to RM118.59 million from RM67.33 million a year ago. Revenue rose 24.6% to RM1.05 billion from RM842.14 million.

Kossan said the results for 2010 were within expectations. “For the year, demand for gloves remains good and management is cautiously optimistic of consistent performance in the financial year of 2011,” it said.

KNM down on lower FY10 earnings, slides 16 sen

  Written by Joseph Chin of theedgemalaysia.com    Thursday, 24 February 2011 10:05

KUALA LUMPUR: Shares of KNM GROUP BHD [] fell 16 sen to RM2.67 on Thursday, Feb 24 after it reported lower earnings of RM131.21 million in FY ended Dec 31, 2010 compared with RM260.55 million in FY09.

At 9.55am, it was down 16 sen to RM2.67 with 3.52 million shares done.

The FBM KLCI fell 4.21 points to 1,506.90. Turnover was 343.94 million shares done valued at RM221.86 million. Losers beat gainers 376 to 104 while 144 stocks were unchanged.

KNM announced on Wednesday it achieved revenue of RM1.56 billion, profit after tax and minority interest of RM131.20 million and EBITDA (earning before interest, tax, depreciation and amortisation) of RM199.37 million for FY10.

“Compared to the previous year, the lower performance in this year was due to lower job orders, lower contribution margins and higher operating costs,” it said.

The financial performance was also weaker compared with the third quarter ended Sept 30, 2010.

When compared with 3Q, KNM said the 4Q revenue of RM384.23 million and net profit before taxation and minority interest of RM6.87 million were lower by RM34.13 million and RM34.16 million  compared to third quarter’s revenue of RM418.36 million and net profit before taxation and minority interest of RM41.03 million respectively.

The lower revenue and profit for 4Q were mainly due to lower production achieved for the quarter and higher operating costs.

Singapore ops boost Genting earnings

PETALING JAYA: Conglomerate Genting Bhd, whose businesses include gaming, hospitality and plantations, saw net profit for the fourth quarter ended Dec 31, 2010 climb 89.66% to RM465.43mil on contributions mainly from the leisure and hospitality division following the commencement of operations of Resorts World Sentosa in Singapore in the first quarter.

Revenue for the quarter under review jumped 76.14% to RM4.08bil compared with the corresponding quarter a year ago while for the full-year (FY10), net profit increased 110.94% to RM2.20bil from a 70.84% surge in revenue to RM15.19bil.

The company said in an announcement to Bursa Malaysia that the leisure and hospitality division's contribution to the rise in earnings was due to the commencement of operations of Resorts World Sentosa while Resorts World Genting's contribution was due to better luck factor in the premium players business.

However, the company noted that while business volume from the British casino operations had shown improvement compared with the previous corresponding quarter, revenue decreased mainly due to poor luck factor and the weaker pound sterling.

Genting said higher palm product prices contributed to increased revenue while the power division's lower revenue was due to lower electricity generation by both the Kuala Langat and the Meizhou Wan power plants.

The company added that the oil and gas division's lower revenue was due to the disposal of Genting Oil & Gas (China) Ltd last December.

Genting said the full-year's profit before tax of RM4.39bil benefited from a one-off net gain of RM413.6 mil arising from deferred consideration while there was also a net gain on dilution of RM436.3mil arising from the reduction in the company's stake in Genting Singapore plc.

Meanwhile, in a separate announcement, Genting Malaysia Bhd, the operator of Resorts World Genting, said the better performance of the fourth quarter was largely due to contributions from the leisure and hospitality business in Malaysia as well as higher revenue from British operations.

The company's net profit gained 1.06% to RM362.12mil while revenue rose 22.18% to RM1.55bil for the quarter under review compared with the quarter a year ago.

For the full year, the company's net profit fell 3.55% to RM1.27bil while revenue grew 6.83% to RM5.33bil.


Genting Bhd 4Q earnings up 89.6pct to RM465.43m, for FY10 RM2.2b

KUALA LUMPUR: GENTING BHD []’s net profit surged 89.6% to RM465.43 million in the fourth quarter ended Dec 31, 2010 from RM245.4 million a year ago.

It said on Feb 23 revenue rose 76% to RM4.086 billion from RM2.320 billion. Earnings per share were 12.57 sen compared with 6.64 sen while it proposed a final dividend of 4.5 sen compared with 4.20 sen a year ago.

It said the higher revenue was mainly from the leisure and hospitality division with the commencement of operations of Resorts World Sentosa in Singapore, during the first quarter of 2010.

“Revenue from Resorts World Genting in Malaysia increased mainly due to better luck factor in the premium players business. The revenue from the UK casino operations decreased mainly due to poor luck factor and the weaker sterling pound. However, the UK business volume has shown improvement over the previous year’s corresponding quarter,” it said.

Genting said the PLANTATION [] division benefited from higher palm products prices. However, its power division recorded lower revenue due to lower generation of electricity by the Kuala Langat and the Meizhou Wan power plants.

“The higher adjusted EBITDA from the Leisure & Hospitality Division in 4Q2010 was mainly attributable to RWS. RWG’s adjusted EBITDA increased due to higher revenue, whilst the UK casinos’ adjusted EBITDA was affected by lower revenue,” it said.

As for FY10, its earnings rose 110.9% to RM2.202 billion from RM1.044 billion while revenue surged 71% to RM15.194 billion from RM8.893 billion.

Group revenue rose by 71% to record a new high of RM15.19 billion in FY2010 (FY2009: RM8.89 billion), while group profit before tax rose by 74% to post a new high of RM4.39 billion in FY2010 (FY2009: RM2.53 billion).

Group adjusted EBITDA rose by 89% to post a new high of RM7.11 billion in FY2010 (FY2009: RM3.77 billion).


KUALA LUMPUR: OSK Research said GENTING BHD []’s FY10 results were in line with its  estimates after adjusting for various exceptional items for 4QFY10.

It said on Thursday, Feb 24 that all of Genting’s divisions apart from the power and oil & gas division reported sequential growth, which drove the group’s core EBITDA 11% higher on-quarter.

“The maiden contribution from Genting Singapore in FY10 was the key driver of Genting’s spectacular 89% on-year full year FY10 EBITDA growth.

“Maintain BUY and TP of RM14.16. The group’s current valuation of 13.2x FY11 PER is attractive against a 3-year EPS CAGR of 18%,” OSK Research said.

Margins of rubber glove firms pinched

 By Ooi Tee Ching

High latex cost and weak US dollar have started to hurt the profit margins of rubber glove companies such as Supermax Corp Bhd and Latexx Partners Bhd, based on their recent quarterly results.
Most analysts, however, are still positive on Hartalega Holdings Bhd, which makes more synthetic rubber gloves than the natural rubber variant.

A sectoral analyst said she continues to have a "buy" call on Supermax's shares although the glovemaker's fourth quarter profits ended December 2010 of RM32.72 million was 14 per cent lower than a year ago.

"We have a 'buy' call because at current levels, Supermax's valuation is still attractive," she said when contacted by Business Times.

Her forecast is based on a conservative estimate of natural latex cost averaging at RM8.60 per kg and the US dollar trading at RM2.90.

She said natural latex consumption will continue to decline as more glove manufacturers join the bandwagon to ramp up nitrile gloves production.

"We'll only change our evaluation if natural latex becomes even more costlier and the US dollar weakens further. We're keeping our fair valuation of Supermax shares at RM6.30 on the basis of a price-to-earnings ratio of 11 times," she added.

OSK Research analyst Jason Yap, in his recent note to investors, also placed a "buy" call on Supermax.

"Our target price for Supermax remains unchanged at RM7.84 based on the existing price-to-earnings ratio of 13 times," he said.

Yap's top two rubber glove favourites are Supermax and Kossan Resources Industries Bhd.

"Supermax's valuation still stands out over some of its peers given its single-digit valuation.

"Going forward, we believe Supermax would be re-rated when natural latex price gets toppish, which we think would be sometime in May 2011 when the wintering season of rubber trees is over," he added.

An analyst from a bank-backed research house said she likes Hartalega's strong profit margin and estimates that the share price to rise as high as RM6.14.

Hartalega's third quarter profit ended December 2010 went up by 5.5 per cent to RM49.20 million from RM37.20 million a year ago.

It is able to make more profits than its rivals because 80 per cent of its total production are synthetic rubber gloves.

"The rise in nitrile latex prices is far less drastic than in natural latex and this is to the advantage of Hartalega when compared to its rivals," she said.

Also, Hartalega is the only rubber glovemaker that has automated its stripping and packing lines to lower its production cost and is seen the most efficient rubber glovemaker in the world.

"We like Hartalega because of its technological advancement over its competitors. We've raised our fair value of Hartalega to RM6.14 from RM5.64 on the basis of a price-to-earning ratio of 10.5 times," she added.

Genting falls, weighs on KLCI

Written by Joseph Chin of theedgemalaysia.com    Wednesday, 23 February 2011 09:38

KUALA LUMPUR: Shares of GENTING BHD [] fell in early trade on Wednesday, Feb 23, which dragged the FBM KLCI into the red.

Genting fell 18 sen to RM10.22 with 1 million shares done. Genting Singapore-C& fell 10 sen to 90 sen.
The KLCI fell 6.84 points to 1,506.79. Turnover was 173 million shares done valued at RM140.58 million. Decliners beat advancers 336 to 71 while 148 stocks were unchanged.

Genting is expected to release its fourth quarter results later Wednesday.

Genting Singapore plc, had on Tuesday, posted net profit from continuing operations of S$91.65 million in the fourth quarter ended Dec 31, 2010 compared with net loss of S$101.69 million a year ago. For FY10, its net profit was S$657.20 million compared with a net loss of S$282.24 million.

At the discontinued operations level, Genting Singapore posted net loss of S$150.32 million after suffering net losses of S$241.97 million. For FY10, it was net profit of S$37.76 million versus net loss of S$277.56 million in FY09.

Net loss attributable to equity holders of Genting Singapore were S$150.32 million versus net loss of S$101.67 million a year ago. For FY10, net profit was S$37.76 million versus net loss of S$277.56 million in FY09.


RHB Research: Genting Singapore FY10 core net profit below expectations

Written by theedgemalaysia.com    Wednesday, 23 February 2011 10:07

KUALA LUMPUR: RHB Research Institute said Genting Singapore plc’s FY10 core net profit was below its expectations, but above consensus, making up 94% of its FY10 core net profit and 107% of consensus.

“The main reasons for the discrepancy were two-fold: 1) higher interest expense of RM95m in 4Q (+77.5%  on-quarter); and 2) higher effective tax rate of 29% (ex-exceptional items) in 4Q.

“Note that on the topline and EBITDA levels, Genting Singapore’s earnings were in line with our forecasts,” it said on Wednesday, Feb 23.

RHB Research said revenue from RWS in Singapore rose 11.5% on-quarter, due to higher VIP volumes (+40% on-quarter), although this was offset slightly by weaker luck factor on a on-quarter basis.

Gross gaming revenue (GGR) per day works out to about S$8.4m in 4Q10 (3Q10: S$8m), notably still about 33% above MBS’ S$6.3m (or US$5m) per day.

“Annualising the YTD numbers, RWS and MBS’ GGR per day imply a 58% market share for RWS (up from c. 55% in 3Q10) in 4Q10, while total annualised gaming revenue works out to be about S$5bn in 2010. This is 11% higher than our annualised projections of S$4.5bn for the year,” it said.

RHB Research said there was o change to its FY11-12 forecasts.
“We introduce our FY13 forecast. We have however, trimmed our fair value to RM2.30 (from RM2.40), after : 1) rolling forward our DCF-based valuation to FY11; 2) updating our WACC assumptions; and 3) updating GS’ net cash/(debt) position to 4Q10,” it said.

RHB Research said in the near term, it does not think there are any catalysts for the stock, as the novelty factor has worn off and the IRs continue to grapple for market share.

The next rerating for the stock may only come once the second phase is ready, depending on whether it is well-received, and this may bring RWS’ earnings to the next stage of growth. For now, it maintains its Market Perform call on the stock.

http://www.theedgemalaysia.com/business/182096-rhb-research-genting-singapore-fy10-core-net-profit-below-expectations.html

BEIJING:Genting Singapore reported yesterday higher revenue from its casino in the city-state, but it now lags rival Marina Bay Sands in terms of profitability.

Genting Singapore said its Resorts World Sentosa casino-resort had adjusted earnings before interest, taxes, depreciation and amortisation of S$389.8 million (S$1 = RM2.38) on revenues of S$775.2 million for the three months ended December.

This was below the S$391.3 million reported by Las Vegas Sands for its Singapore casino.

The Marina Bay Sands’ revenue for the three months was lower at S$717.1 million. — Reuters

http://www.btimes.com.my/Current_News/BTIMES/articles/20110222235904/Article/index_html

Hektar upbeat on mall ops

 By Zurinna Raja Adam

HEKTAR Real Estate Investment Trust (REIT) (5121), owner of Subang Parade mall, is unperturbed by the newly-opened rival Empire Shopping Gallery as each mall goes for a different segment of the market.

Instead, it views Empire Gallery as complementary to the business of Subang Parade and the existing retail mix in Subang Jaya.

Hektar REIT chairman and chief executive officer Datuk Jaafar Abdul Hamid said Subang Parade will continuously invest in advertising and promotional activities like Chinese New Year, Valentine's Day and Shop for School campaign to remain competitive.

"Subang Parade has enjoyed occupancy of more than 99.8 per cent since 2007. This means, for three consecutive years, very few new retailers could enter a prime mall in the Subang Jaya market as there was no space available," Jaafar said in an interview in Subang Jaya yesterday.
Subang Parade has lost a tenant, Toys R Us, which has moved to Empire Gallery, a boutique mall with 180 stores offering a choice of international and local brands.

However, this creates a new opportunity for Hektar REIT as it will be bringing in an eight-screen cinema offering a total of 1,400 seating, by May this year.

"In one stroke, we found a solution which will improve traffic and maintain Subang Jaya's uniqueness as it is the only cinema in a mall in Subang Jaya," Jaafar said.

Hektar REIT owns two other malls - Mahkota Parade in Malacca and Wetex Parade in Muar, Johor. All three malls have a combined occupancy of 95 per cent and portfolio value of RM742 million.

Maybankard 2 Cards. 2 is all you need. Find out more.

The group is aiming to breach the RM1 billion mark and is continuously on the lookout to buy either a neighbourhood or regional mall.

"We are always looking for new acquisitions to improve our portfolio. Our business is in retail management and we have over 300 retailers in our property. This is our competitive advantage where we can offer new retail property acquisition in future," Jaafar said.

Among its criteria for acquisition are purpose-built shopping centres with anchors starting from 150,000 sq ft of net lettable area and location in established or emerging neighbourhood with target market segments.

"It is important that we can acquire shopping centres with minimal sold lots. Our benchmark is not more than 10 per cent, as we would like to have control over the property we acquire," said Jaafar.

For its financial year ended December 31 2010, Hektar REIT posted a net income of RM39.2 million, or 12.24 sen per unit, up 5.5 per cent from the previous year. Revenue grew by 3.6 per cent to RM90.9 million against RM87.7 million previously.

Subang Parade remains the group's flagship property, contributing 48.7 per cent to its total gross revenue and some 50.9 per cent to its net property income.

Masterskill CEO may raise his stake in company

KUALA LUMPUR: Masterskill Education Group Bhd group chief executive officer Datuk Seri Edmund Santhara is considering to up his stake in the group.

In a filing with Bursa Malaysia on Wednesday, the education-based Masterskill said Edmund, who owns some 90.6 million shares, or 22.1% stake in the company had announced his intention to deal in his securities in Masterskill.

“(I'm) looking at purchasing at this price,” Edmund said when contacted by StarBiz yesterday.

Datuk Seri Edmund Santhara ... ‘Well, I need to wait and see.’

 

However, he said he could only buy the shares today as per Bursa Malaysia rules.

“Well, I need to wait and see. Perhaps, anything below RM2 doesn't justify keeping the company listed,” Edmund said when asked on the amount of shares he intended to purchase.

Last December, he told StarBiz that the share price then of RM2.22 was not “justifiable” for a firm that made about RM100mil in net profit annually.

He said that the company was fundamentally sound and that its Kuching campus was already in operation.
“The current share price weakness presents a great buying opportunity for Edmund to accumulate its shares,” an analyst said, adding that Edmund's move to purchase more shares may be a practical thing to do.

The analyst said most companies undertake share buybacks if they believe their shares are undervalued, or to send a signal of confidence in the company.

Masterskill, which raised RM771.3mil from its initial public offer (IPO) in May 2010, has succumbed to selling pressure yesterday.

The counter fell to a record low since its listing after Fidelity Management and Research (FMR) LLC, the parent of Fidelity Investment, sold 280,000 shares in the former.

The counter fell 8 sen, or 4.32%, to RM1.77, its lowest since its listing on May 18, 2010.
However, Edmund remains unperturbed by the divestment by FMR.

“It's a simple portfolio investment, so it's normal. The company fundamentals remain strong,” he said.
Edmund was confident its share price would stabilise soon. “As the company is good, the price will soon stabilise after the seller is gone, mainly Fidelity Investments,” he said.

FMR, one of Masterskill's substantial shareholders, has been trimming its stake in the education group since October. Following the disposal of 280,000 shares, FMR held a direct stake of 20.6 million shares, or 5.02% in Masterskill.

Dealers attributed the price slide the stock has fallen some 30 sen from its one-month high of RM2.34 on Jan 13 mainly to the recent selling pressure. However, they believed the selling might not be done as yet.

As at Sept 30, the nursing and allied health sciences education provider has 17,613 students. It posted a net profit of RM26.2mil for the third quarter ended Sept 30 on revenue of RM80.7mil.

The education group is due to announce its fourth quarter ending Dec 31, 2010 financial performance tentatively next Wednesday. Bloomberg's consensus estimates expect Masterskill to post RM104.6mil in net profit for the full financial year ended Dec 31, 2010.

Supermax counts on new income stream

Firm to sell medical disposal products made by other parties
By YVONNE TAN

yvonne@thestar.com.my
KUALA LUMPUR: Glove maker Supermax Corp Bhd is banking on a new income stream derived from global sales and marketing network to mitigate any effects of higher production cost.

Executive chairman and group managing director Datuk Seri Stanley Thai said the company would “aggressively globalise” its operations via its net work of about 700 distributors worldwide.

“We will sell and distribute medical disposal products t hat we do not manufacture such as surgical masks via these dist ributors.

»The new stream of income is expected to contribute 5% to our net profit this year« DATUK SERI STANLEY THAI

 

“The new stream of income is expected to contribute 5% to our net profit this year,” Thai said after a media and analyst briefing on the company's prospects here yesterday.

At the briefing earlier, Thai said Supermax expected latex pri ces to drop to RM7.50 per kg th is year from RM10.60 now.

Supermax recently reported a 24.8% drop in its fourth-quarter net profit to RM32.7mil from RM43.5mil in the same quarter a year earlier largely on continuous high latex prices.

“Natural rubber latex prices are over-speculated and we expect to see a sharp fall in the second quarter of this year,” Thai said.

The price of the raw material has increased more than 70% in the past one year. Thai said 70% of Supermax's production lines were int er-switchable for natural late x and nitrile gloves.

“This year, nitrile powder-free gloves will make up 40% to 45% of our total glov es sold compa red with 30 % previously,” he said.

Supermax has an installed capacity of 17.6 bi llion pieces per annum. This year, the company plans to increase its product ion capacity by 4.1 billion to 21.7 billion pieces, according to a note by Kenanga Research.

Thai said selling prices, which were denominated in the greenback, were adjusted frequently to mitigate the impact of weak US dollar.

In notes to clients yesterday, analysts said Supermax's fourth-quarter results were largely within expectations.
“We expect a challenging year ahead for rubber glove makers, given the all-time high latex prices.

“Nevertheless, the demand for powder-free medical gloves is still going strong; moreover, distributors in the United States have been buying less and keeping their inventory levels at the lowest possible in the past few months; hence we believe buying will continue once they run out of stock,” Kenanga said.

The United States is Supermax's largest market, contributing 40% to its sales.

OSK Research: Supermax FY10 results within expectations, TP unchanged at RM7.84

Written by theedgemalaysia.com    Wednesday, 16 February 2011 08:50

KUALA LUMPUR: OSK Research said Supermax Corp Bhd’s FY10 results were within expectations and as anticipated, the results were lower on-quarter owing to spiralling latex price and no improvement in forex.

The research house said on Wednesday, Feb 16 although the company is the closest to Top Glove in terms of product mix, it has managed to differentiate itself by having a higher OBM mix as well as distribution income to smoothen its manufacturing profits.

“Our target price for Supermax remains unchanged at RM7.84, based on the existing PER of 13x FY11 EPS. Supermax remains one of our top two picks for the sector besides Kossan. Although we maintain Neutral on the sector, Supermax’s valuation still stands out over some of its peers given its single-digit valuation.

“Going forward, we believe the stock would come in for a re-rating when latex price gets toppish, which we think would be sometime in May 2011 when the wintering season of rubber trees is over,” it said.

Supermax posts lower net profit

 By LEONG HUNG YEE  

Q4 result affected by latex costs and exchange rate

PETALING JAYA: Supermax Corp Bhd's net profit fell 24.8% to RM32.7mil for the fourth quarter ended Dec 31 from RM43.5mil previously due to the continuous high prices of latex and unfavourable exchange rates.

Revenue for the quarter hit RM232.7mil, an increase of 18.4% compared with RM196.4mil posted in the same period a year ago. Pre-tax profit fell to RM32.8mil from RM50.3mil and earnings per share eroded to 9.62 sen versus 16.22 sen previously.

The glove maker has proposed a tax exempt final dividend of 5% per ordinary share of 50 sen for the financial year ended Dec 31, 2010 subject to the approval by shareholders at the forthcoming AGM.

For the full year, Supermax's pre-tax profit rose to RM168.2mil from RM126.6mil. It recorded a 14.9% rise in turnover to RM923.2mil. Net profit rose 32.8% or 49.45 sen per share, for the period under review.

An analyst says glove makers have shown that they are able to pass on the cost of higher latex prices and weaker US dollar to end-consumers.

 

The group said it had managed to achieve the profit guidance of RM168mil, as set out at the beginning of the year, despite the difficult operating environment.

Supermax said the rising costs of latex and weakening of the US dollar posed a challenge; nevertheless, its management had the experience to tackle the headwinds and minimise their impact.

“Glove prices are raised in tandem with latex price increases and management has taken steps to adjust glove prices on a more regular basis to pass through the cost increase,” it said in the notes accompanying its financial results.

Supermax believed the US dollar would not see a significant fall this year as it did last year and latex prices would correct to more reasonable levels this year.

“Moving forward, we expect demand to remain strong, driven by new usages for gloves, rising demand from developing countries that are growing more affluent and spending more on healthcare. More countries are also regulating their healthcare industry,” it said.

On its prospects for FY11, Supermax is targeting earnings growth of between 15% and 20% with its planned capacity growth and changing of product mix in line with market demand and price trends.

Meanwhile, analysts said the higher latex prices had affected the industry as a whole, eroding their margins while a situation of oversupply and normalising demand prevailed.

However, they were positive on rubber glove makers which still enjoyed robust demand from the traditional healthcare as well as new segments such as the food and services industry.

An analyst said Supermax's latest quarterly results was within its expectations but slightly below market consensus. “Glove makers have shown that they are able to pass on the cost of higher latex prices and weaker US dollar to end-consumers,” he said.

According to Bloomberg, Supermax's net profit for FY10 accounted for about 95% of the consensus estimates for FY10. Bloomberg's consensus estimates expect Supermax to post RM195.4mil in net profit for the full year in FY11.

In an earlier report, CIMB research believed Supermax might report an 8% to 21% quarter-on-quarter decline in fourth quarter net profit to RM30mil to RM35mil. It implied a FY10 net profit of RM165mil to RM170mil or a shortfall of 8% to 10% against its forecast of RM183.8mil and 5% to 7% against consensus.
The research house remained positive of Supermax's long-term earnings outlook and would not change its recommendation when the results were released.

Earlier, glove companies reported mixed earnings. Hartalega Holdings Bhd had posted a higher net profit of RM49.2mil for the third quarter ended Dec 31, 2010, from RM37.2mil. a year ago, while its revenue rose to RM188.1mil from RM148.6mil.

The higher profit was in line with the group's continuous expansion in production capacity, increase in demand, effective cost control and improvement in production processes.

Meanwhile, Top Glove Corp Bhd posted a 44% drop in net profit to RM36mil for the first quarter ended Nov 30, compared with RM65.2mil previously due to persistently high latex prices and the continued weakening of the US dollar coupled with the time lag in passing on the higher costs to its customers. Its revenue stood at RM491.5mil against RM472.3mil previously.

Genting expediting share buyback

Written by Yong Min Wei    Thursday, 10 February 2011 14:25

KUALA LUMPUR: Genting Malaysia Bhd appears to be expediting its share buy back activities while at the same time committing fresh investment into gaming assets in the US and UK.

As at Feb 8, 2011, total Genting shares retained in the treasury account amounted to 252.95 million shares, which is worth RM870.2 million based on GenM’s closing price of RM3.44 yesterday. The number of treasury shares has risen by 21.5% from 208.2 million as at May 31, 2010.

Genting shares retained in the treasury account currently represented about 4.3% of the group’s total issued shares of 5.92 billion shares.

Note that in a filing with Bursa Malaysia on Jan 26, the group had said it “intends to purchase up to a further 340.86 million of its shares (representing approximately another 5.76% of the issued and paid-up share capital) within the next five months.”

As at Jan 26, Genting had 4.24% of its shares in the treasury account. Such further purchase is expected to cost the group at least another RM1.17 billion, assuming if Genting’s shares doesn’t fall from its current level, and nudge its total treasury shares to the permitted 10% level.

An artist's impression of the Aqueduct Racino in New York.

As per Bursa’s listing requirement, a public listed entity generally is not permitted to own shares or hold any of its shares as treasury shares if this results in the aggregate of the shares purchased or held exceeded 10% of its issued and paid-up capital.

“Share buybacks can enhance the returns per share of a company. It will be better if the shares are purchased when they are undervalued,” said a market observer, explaining that such moves theoretically favour shareholders as earnings and dividends are split among fewer shares.

An analyst familiar with Genting believes that the group will continue to buy back shares in the weeks to come, even if the stock looks firm to potentially test its 52-week high of RM3.72, adding that the group has sufficient cash flow to purchase more than 300 million of its shares within five months.

He said Genting’s decision to buy back shares also enables the group to earn a stronger return on excess cash. He noted Genting’s 30-year contract to redevelop the Aqueduct Racetrack in Ozone Park, New York, has made the group “extremely attractive.”

“Genting has been comfortable and actively buying back several tranches (of its own shares) at RM3.20 to RM3.30 levels. With close to RM900 million worth of treasury shares, it could also keep a portion for strategic choices, such as cancelling it or distributing it to shareholders,” he said while not discounting Genting declaring interim dividend payment in the first half of FY2011 ending Dec 31.

Genting’s net profit for 3QFY10 ended Sept 30 dipped 6.4% to RM336.41 million from RM359.45 million a year ago on the back of a lower revenue of RM1.2 billion versus RM1.34 billion. It posted basic earnings per share of 5.92 sen in 3QFY10 while net assets per share stood at RM1.96 as at Sept 30.

Shares in Genting  yesterday added four sen to close at RM3.44 with turnover of 9.82 million units. The counter had posted a 52-week high of RM3.72 on Sept 21, 2010 and a low of RM2.46 on July 2, 2010.

Of the 25 stockbroking firms polled by Bloomberg that were covering Genting, there were 11 “buy” recommendations consensus target price of RM3.65. Currently, the stock is trading at a consensus forward price-to-earnings ratio of 15.22 times.

Tabung Haji sells 1m Masteel shares

  Written by Joseph Chin of theedgemalaysia.com    Wednesday, 09 February 2011 11:17

KUALA LUMPUR: Lembaga Tabung Haji disposed of one million shares of Malaysia Steel Works (KL) Bhd on Jan 31 and Feb 2, reducing its stake to 14.026 million shares or 6.66%.

A filing with Bursa Malaysia showed the pilgrimage fund had disposed of 500,000 shares on Jan 31 and another 500,000 shares on Feb 2.

The share price closed at RM1.28 on Jan 31 and RM1.30 on Feb 2.

Masteel shares had attracted attention after the company and KUB MALAYSIA BHD [] (KUB) proposed to build and operate a 100km inter-city rail transit system in Iskandar Malaysia, which will connect to the MRT line from Singapore.

To recap, the companies said on Jan 19, 2011, the project could cost over RM1 billion, and consists of up to 25 commuter stations in major towns in the Iskandar Malaysia region in the initial stage.

"The operation of the inter-city rail transit shall be based on a 25-year concession," they said in the statement after the signing of the head of joint venture agreement to undertake the project.

Masteel and KUB would hold 60% and 40% equity stakes respectively in the JV company, Metropolitan Commuter Network Sdn Bhd. The project would be undertaken in three phases and completed within 24 months from project commencement.

The building of the rail transit infrastructure would also be funded by project financing under the Public-Private Partnership scheme (PPP).

Genting, Genting S’pore down on concerns of lower VIP customer flow

Written by Chua Sue-Ann    Tuesday, 08 February 2011 11:33

KUALA LUMPUR: Share prices of Genting Bhd and its subsidiary Genting Singapore plc fell from market open yesterday on concerns of a possible reduced volume in its VIP customers at the latter’s Resorts World Sentosa (RWS) integrated resort.

Genting’s shares opened after the holiday break at RM11.52, falling throughout the day to close at an intra-day low of RM10.90, shedding 62 sen. Some 8.46 million Genting shares were traded.

Across the causeway, Genting Singapore’s shares fell nine cents from S$2.15 to S$2.06 after a day of volatile trading activity with almost 164.32 million shares exchanged.

This came after Citi Investment Research said it reduced its revenue forecast for Genting Singapore’s 4QFY10 results, which is for the period between October and December last year by about 7% to S$765.1 million (RM1.8 billion). Consequently the research house also reduced Ebitda (earnings before interest, tax, depreciation and amortisation) estimate by about 7% to S$371.7 million.

In a note dated Feb 6, Citi Investment Research also said it had conservatively lowered its RWS 4QFY10 VIP rollings assumption to a 5% quarter-on-quarter (q-o-q) decline from the 2% q-o-q growth forecast earlier.

Consequently, the research house also slashed Genting’s earnings estimates for FY10 to FY12 by 1% to 8%.

Genting is expected to report its fourth-quarter results by end of this month.

Citi Investment Research’s revision of Genting’s performance forecasts comes after Las Vegas Sands Corp last week reported a 20% q-o-q drop in its VIP gaming business in its Singapore casino, Marina Bay Sands, sparking concerns that its rival, RWS could see similarly weak performance.

“We believe we could see some ripple effect as the market could become worried about a possible volume decline at Resorts World Sentosa,” Citi Investment Research said.

The research house noted that in Las egas Sands’ 4QFY10 results released on Feb 3, Marina Bay Sands had generated Ebitda of US$305.8 million (RM929.6 million) and a 54.6% margin which had been the highest numbers from any single property in Las Vegas Sands’ history. The results were largely attributed to Marina Bay Sands’ 3.11% VIP hold rate and stringent cost controls, Citi Investment Research said.

Citi Investment Research said it had also lowered its VIP rolling assumption for Marina Bay Sands by 20% and Ebitda by about 3% for the FY11 and FY12 estimates despite guidance from Las Vegas Sands’ management that Marina Bay Sands’ Ebitda in January had reached US$110 million.

Nevertheless, it remained positive on the growth prospects in the Singapore gaming market despite lower volume at Marina Bay Sands’ VIP business and a possible similar decline at RWS.

Singapore is expected to generate US$5.1 billion in gross gaming revenue in 2011, implying that Singapore’s market size with the two casinos was roughly 85% of Las Vegas’ market size, Citi Investment Research said.

Meanwhile, AmResearch yesterday upgraded Genting Singapore to a “buy” from a “hold” with a higher fair value of S$2.60 from the previous fair value of S$2.13.

AmResearch said it raised Genting Singapore’s fair value to account for the expected higher casino revenue growth underpinned by increased VIP gaming turnover, higher casino patronage and a long-term terminal growth rate of 8.5% from FY20 onwards.

Genting Singapore’s forecast net profit growth of over 20% annually from FY11 to FY13 would likely be driven by an expected increase in casino patronage and VIP gaming revenue as well as growth in visitorship and average spending at non-casino attractions, AmResearch said.

“We believe that Genting Singapore is in the early stages of profit growth. Hence, despite the group’s strong core net earnings in the first year of operations, we reckon that there is still upside potential,” AmResearch said in a note dated Feb 7.

Genting extends losses on lower volume worries

Written by Joseph Chin of theedgemalaysia.com    Wednesday, 09 February 2011 15:29

KUALA LUMPUR: GENTING BHD [] fell for the third day on Wednesday, Feb 9, down another 22 sen to RM10.52 on concerns of a possible reduced volume in its VIP customers at the Resorts World Sentosa (RWS) integrated resorts.

At 3.08pm, Genting shares fell 22 sen to RM10.52 with 7.45 million shares done.

The FBM KLCI fell 1.58 points to 1,537.97. Turnover was 1.48 billion shares valued at RM1.50 billion. Losers beat gainers 498 to 289 while 269 stocks were unchanged.

Genting’s share price is down 82 sen or 7.23% since Feb 2, when it ended the half-day session at RM11.34. The markets were closed on Thursday and Friday last week for the Chinese New Year holidays.

Meanwhile, CIMB Equities Research is retaining its Outperform on its subsidiary, Genting Singapore.

“We tweak our FY10 net profit forecast after factoring in lower gross gaming revenue (GGR) following Marina Bay Sands’ 4Q10 weaker-than-expected GGR growth (on the back of a 20% on-quarter decline in VIP rolling).

“We still expect Genting Singapore to clock in S$378 million EBITDA for 4Q. We keep our FY11-12 GGR assumptions as we expect the opening of new attractions at Resorts World to draw more visitors, in turn bumping up its casino patronage,” it said.

CIMB Equities Research said Genting Singapore remains an OUTPERFORM with an unchanged SOP-based target price of S$2.70.

It expects stock catalysts from: 1) a speedier ramp-up of its operations; 2) the licensing of junket operators; and 3) sustained leadership of the gaming pie in Singapore, now estimated at S$4.7 billion, down 3% from its original assumption.